Writing in today’s AFR, tax partner Shaun Cartoon argues that there’s ample scope for the government to reform the tax treatment of trusts, but there’s a risk that if they go too far investment, talent, and wealth will be pushed offshore.
Shaun explains that there are almost 1 million family trusts in Australia, and they are used by families, professionals, small businesses and farmers for asset protection, succession planning and income streaming. “While some are used aggressively,” he writes, “many are simply a practical way of navigating a system riddled with structural distortions.”
He goes on to explore options for “genuine family trust reform” that’s not just about “revenue or headlines”, before turning to the potential risks of getting it wrong. “No trust reform will succeed unless the top personal tax rate is also reduced. Flattening the difference between those tax rates is the only way to truly defuse the incentive for income streaming and entity arbitrage.
”Push too hard on trusts, and we risk an exodus of capital – and people – to more favourable tax regimes like Singapore, Dubai or Italy, where the rules are simpler and the welcome warmer.”
